Proposals to reinstate the stock transfer tax are like a bad penny: They seem to reappear every time budget gaps need to be closed or revenue generated. Last week, Fernando Ferrer unveiled his $4 billion version, claiming it would barely hurt the average New Yorker.

Of course, not if you consider the average New Yorker a pizza maker, bicycle messenger, clothing storeowner, or waitress at the local diner. Their jobs, along with the jobs of tens of thousands of their colleagues in the services sector, would likely be eliminated if this job killing tax were revived.

In 1981, state leaders repealed the tax, recognizing that artificially inflating stock costs made our state less competitive in a burgeoning global marketplace. Nearly a quarter century later, it’s self-evident that taxing every stock transaction in New York places our capital markets at a severe disadvantage and endangers the jobs of many low-income workers.

The folly of the tax is that it is doomed to fail in the electronic age.

In recent years, electronic trading networks and other alternate trading platforms have chipped away at the supremacy of New York-based exchanges and even New York’s role as the financial capital of the world. Today, the Big Board’s market share of trading in its own listed stocks hovers around 80%. The New York Stock Exchange merger with Archipelago announced last week reflects the intensity of competition and proves that electronic trading will play an increasingly greater role in the industry.

Investors have been empowered with countless options to execute their orders at virtually any time of the day and in virtually any market of their choosing. Brokers are also legally required to secure the “best price” for their clients. Why buy 100 shares of Microsoft on Nasdaq when Chicago, London, Tokyo and cyberspace sell it cheaper? The stock-transfer tax punishes New York at the expense of tax-free states and countries and electronic markets.

As brokers seek more competitive markets to execute their orders, trading volumes on the New York exchanges – the basis for generating tax revenue – would dramatically decline. That’s what happened in Sweden, which saw 30% of all trading in Swedish companies shift from the Stockholm Exchange to the London Stock Exchange after a 2% stock transfer tax was implemented.

The math is simple: Fewer trades on the New York exchanges equal less tax revenue for the city. Mr. Ferrer’s boast of raising $4 billion in four years mistakenly presumes that investors won’t seek the best price by easily shifting their orders to a tax-free exchange.

This decline in trading volume would leave New York not just with less-than-expected revenue; it would exacerbate unemployment. A study by the Partnership for New York City revealed that a 10% decline in trading volume at the New York exchanges translates into a loss of up to 11,000 jobs in the securities industry alone. Those job losses would create a chain reaction of unemployment across many business sectors, including retail, services, business services, and restaurants. Its study estimates the loss of 23,000 to 33,000 private sector jobs, representing up to $3.7 billion in lost wages.

A study by the nonpartisan New York City Independent Budget Office offered a more disturbing picture, predicting the loss of 60,000 jobs under one stock-transfer-tax proposal pushed by the State Assembly in 2003.

Considering that one job in the securities industry creates at least two service sector jobs, workers on the lower rung of the economic ladder would be hardest hit by unemployment under a stock-transfer tax.

And with this anticompetitive tax nipping at their bottom lines, financial services companies would likely look to save millions of dollars by uprooting to tax-free areas like New Jersey, Connecticut, or anywhere in the world. Newark, Stamford, and London would welcome our businesses – and all those private sector jobs – with open arms.

At a time when Lower Manhattan and New York City are struggling to recover, the loss of tens of thousands of jobs would undo the progress we have made since September 11, 2001, and plunge New York back into the despair of the early 1990s.

Instead of reaching back in time and reviving failed tax policies, New York must look to reduce taxes and control spending. We need to increase capital formation to stimulate economic growth, create new jobs, raise living standards, and empower individuals.

For the sake of New York City, may the stock-transfer tax rest in peace.

Mr. Fossella is a congressman for the 13th Congressional District, which includes Staten Island and part of Brooklyn.